Develop product strategy

To: CEO and Executive Team From: VP Product Subject: Next year’s strategy: win the mid-market, fix the cost to serve

Diagnosis

I think you’re wrong that enterprise should be our primary strategy next year. Enterprise can be a selective opportunity, but the evidence does not support building the company around it.

Mid-market is our strongest growth engine: it has the best retention (118% net revenue retention, 7% logo churn), a 61% win rate against our main competitor, and clear expansion paths through more locations and seats. Its requested improvements—multi-location reporting, payroll integrations and shift templates—reinforce the core scheduling product rather than pull us into one-off work. At $14,500 average ARR, it represents roughly $12.9 million of ARR across 890 customers.

Enterprise has only 34 customers and about $3.3 million of ARR. Its economics and delivery model are less attractive: 64% gross margin, $21,000 annual support cost per customer, 26-month reported CAC payback, and a nine-month sales cycle. Five of the last eight deals required custom features, consuming about 70 engineer-weeks in total. Hiring 10 AEs and building custom workflows would scale a motion we have not shown is repeatable. SSO and audit logs may be worthwhile if they serve a broader, standard product—not as the opening move in a bespoke enterprise program.

SMB is also not where we should prioritize growth investment. It has 6,200 customers, but 34% annual logo churn, 88% NRR, and 62% of support tickets. Unlimited phone support on the $79 plan appears poorly matched to the segment’s economics.

One caution: the reported payback figures do not reconcile consistently with ARR, gross margin and support cost. We should standardize their definition before using them to allocate capital.

Guiding policy

Play to win multi-location mid-market employers with hourly workforces. Make Cadence the easiest dependable way to schedule and track time across locations, with strong payroll connections and repeatable workflows.

Stop treating enterprise as the company’s growth thesis. Do not hire 10 enterprise AEs or build customer-specific workflows with the core team. Pursue enterprise deals only when they fit the standard product, support attractive economics and do not displace mid-market priorities.

Stop subsidizing SMB support through unlimited phone service on the entry plan. Keep serving SMB customers, but shift the offer toward scalable self-service and appropriately priced support—not a broad retreat from the segment.

Coherent actions for next year

1. Make the mid-market roadmap the top product priority. Deliver multi-location reporting, payroll integrations and shift templates in that order, validating scope with customers and tying releases to adoption and expansion. Build configurable, reusable capabilities; decline requests that create customer-specific branches.

1. Focus go-to-market on repeatable mid-market wins. Equip sales and onboarding around multi-location use cases, implementation playbooks and expansion from existing locations and seats. Invest in customer success where it can turn adoption into expansion and reduce avoidable churn.

1. Set an enterprise investment gate. Pause the proposed 10-AE hiring plan. Evaluate SSO and audit logs as reusable platform capabilities, but fund them only with evidence of demand beyond individual deals. Require enterprise opportunities to fit the standard product; price implementation and customization explicitly, and do not commit core engineering to bespoke workflows. Revisit enterprise hiring only when deals are repeatable and payback is demonstrably attractive.

1. Repair SMB service economics without breaking the customer experience. Move entry-plan support toward self-service, improve onboarding and help content, and test paid higher-touch support. Measure the effect on conversion and retention before making a broad pricing or support change.

1. Create one trusted segment-economics view. Reconcile CAC payback and consistently include gross margin, support, implementation and custom engineering costs. Review it quarterly before adding segment-specific capacity.

How we’ll know it’s working

• Mid-market: NRR rises from 118% to at least 120%; logo churn falls from 7% to 6% or less; win rate stays at or above 60%. Track ARR expansion from added locations and seats, plus adoption of the three roadmap investments.
• Enterprise: No broad AE expansion; custom core-engineering work falls sharply, with a target of no more than two engineer-weeks per won deal. Track fully loaded payback and sales-cycle length before increasing investment.
• SMB: Reduce support tickets per customer and support cost per customer; improve trial conversion from 4% without worsening churn. Make any support-tier changes conditional on those customer outcomes.
• Company-wide: Review segment ARR, gross profit after support and implementation, and fully loaded CAC payback together. Growth that depends on unrepeatable engineering or uneconomic service is not success.

This strategy does not abandon enterprise or SMB. It puts our next year’s scarce product and hiring capacity behind the segment with the clearest evidence of repeatable growth, while setting firm conditions for investing more elsewhere.

Cadence: Next Year’s Strategy

To: CEO and Executive Team From: VP Product Decision: Make multi-location mid-market businesses our growth engine—not enterprise.

1. Diagnosis: Our constraint is focus, not deal size

I believe the enterprise-first plan is wrong for next year. Enterprise may become an attractive market, but our current evidence does not justify hiring ten enterprise AEs or orienting the roadmap around their deals.

Cadence has three materially different businesses:

Customers × average ARR.

Mid-market already generates 56% of ARR. It combines our best retention, strongest expansion, fastest acquisition payback, and highest gross margin, at 81%. A 61% win rate against our main competitor suggests a defensible product advantage. Expansion through locations and seats gives us a repeatable growth mechanism.

Enterprise offers larger contracts, but not yet a better business. Gross margin is 64%, the sales cycle averages nine months, and five of the last eight deals required custom development. Those five deals consumed approximately 70 engineer-weeks. Hiring sellers before fixing this delivery model risks scaling commitments faster than reusable product capability.

SMB is a different problem: substantial revenue with weak retention and disproportionate service demand. It generates 62% of support tickets; annual support cost averages $610 against $1,100 in ARR. Unlimited phone support on a $79 monthly plan is misaligned with self-service economics. A 4% trial conversion rate compounds the acquisition problem.

The central challenge is therefore allocating scarce product, engineering, and commercial capacity toward repeatable, retained revenue. Enterprise customization and SMB service demands are drawing capacity away from the segment where our model works best.

2. Guiding policy: Win multi-location mid-market

Where we play

Our primary customer is a mid-market business with hourly workers across multiple locations, where scheduling consistency, consolidated visibility, and payroll handoffs create recurring operational pain.

Our promise: make running the next location easier than running the first.

We will deepen that advantage and turn successful initial deployments into additional locations and seats. We will first target industries and acquisition channels where our own mid-market cohorts show the strongest retention and payback; the supplied evidence does not yet support choosing a specific vertical.

Enterprise remains a selective adjacency. SMB remains a supported, increasingly self-service business—not our primary acquisition investment.

What we stop

• Do not approve the ten-enterprise-AE hiring plan or a dedicated solutions-team buildout.
• Stop letting individual enterprise deals dictate core-team custom workflows.
• Do not commit to the entire enterprise feature bundle. SSO and audit logs must earn priority through demonstrated, reusable demand—not their “enterprise” label.
• Stop scaling SMB paid acquisition under current economics.
• End unlimited phone support as the default for new low-priced plans, while honoring existing commitments and managing any migration carefully.
• Stop broad roadmap work that cannot demonstrate a connection to mid-market acquisition, retention, expansion, or essential platform health.

We will continue supporting existing enterprise and SMB customers. Focus is not abandonment.

3. Coherent actions for next year

A. Build the multi-location growth loop

Product and Engineering: Give mid-market the clear majority of discretionary roadmap capacity, after reliability, security, and contractual obligations.

Sequence three connected capabilities:

1. Multi-location reporting: Give central operators visibility into staffing and hours across their estate.
2. Payroll integrations: Prioritize providers used by the largest share of our target accounts; reduce recurring payroll friction.
3. Shift templates: Make successful scheduling practices reusable across locations.

In Q1, validate scope with retained, expanding customers and establish adoption and workflow baselines. Release reporting and the first prioritized integration in the first half; expand integrations and template-based rollout in the second half. Measure customer outcomes and subsequent location adoption, not merely shipment.

B. Sell and expand the same repeatable product

Sales and Customer Success: Redirect incremental commercial investment toward mid-market rather than enterprise hiring.

Package a standard multi-location deployment, define onboarding milestones, and build expansion reviews around customers’ remaining locations. Align incentives with retained recurring revenue and successful activation, not bookings alone.

Increase acquisition spending in stages only while segment payback remains within our guardrail. Do not assume today’s economics survive unlimited scaling.

C. Repair SMB service economics

Support, Product, and Finance: Identify the largest ticket drivers in Q1. Improve onboarding and in-product guidance around those problems; test appropriately priced phone support and service tiers for new customers.

Pilot changes before broad rollout. Evaluate support savings alongside conversion, retention, and revenue effects. A lower ticket count caused by driving customers away is not success.

D. Keep enterprise as a bounded learning option

Sales and Product: Accept new enterprise opportunities only when they fit the standard product, require no bespoke core-team development, and meet Finance-approved deal economics.

Review enterprise quarterly. Reconsider a larger investment only after multiple customers buy and deploy substantially the same product, with improving margin and acquisition payback. One marquee logo is not proof.

E. Establish a shared economic scorecard

Finance: In Q1, reconcile acquisition costs, implementation costs, support allocation, and payback definitions across segments. Confirm whether support is already included in gross margin before subtracting it again. Track custom engineering separately so its opportunity cost remains visible.

4. How we will know it is working

These are proposed operating targets, not forecasts:

The executive team will review results monthly and resource allocation quarterly. Leading indicators are faster location activation, adoption of the new workflows, and expansion pipeline; financial outcomes remain the test.

The strategy is not “avoid enterprise.” It is “scale the repeatable business we have earned.” Mid-market gives us the strongest foundation for growth next year—and a healthier route into enterprise later.